The tariffs are a needed blow to the “progressive” tax system

To each according to what was taken

Democrats think Americans pay too little in taxes. More specifically, they think “rich” Americans fail to pay their “fair share.”

They play fast and loose with those terms “rich” and “fair share.” Their unstated definition of “rich” is people who make more than the Democrat hurling the allegation. And they never do define “fair share.” It’s always just more, more, more on the rich, rich, rich.

Never mind that the top 1% of earners pay 40% of federal income taxes, the top 5% pay 61%, and the bottom 50% pay only 3%.

There’s another kind of tax in the news this week. President Trump announced tariffs on imported goods. The tariffs vary by country and by goods, but the broadest one is 10%. Some things are exempt from the new tariffs, and some things are subject to a higher one.

Democrats argue that these tariffs are, in effect, a sales tax on American consumers. The argument is that foreign manufacturers importing their wares into America will simply pass the tariff cost on to American consumers in the form of higher prices.

That’s approximately true but not entirely, for several reasons. For one, the foreign manufacturers will probably absorb some of the tariffs themselves by taking it out of their profit margins. To the extent that happens, the tariff is a tax alright, but it’s a tax levied on foreigners.

I like the idea of foreigners paying some of Americans’ taxes.

For another thing, Americans will probably shift their buying habits somewhat away from foreign goods once tariffs make them more expensive. It’s hard to predict how much of that will happen.

For simplicity, let’s assume what the Democrats and their media allies have assumed – the worst. Let’s assume that the quantity of imports does not decline, that this 10% winds up getting levied on all of them, and that the whole 10% gets passed on to American consumers.

What would that add up to in dollars?

America imports about $4 trillion worth of goods annually. Therefore, under those assumptions, a 10% import tariff would cost Americans about $400 billion in higher prices.

The Democrats would have you believe that this $400 billion goes up in smoke. It does not. Like any other tax, it goes to the U.S. Treasury.

Even Democrats know this. (Well, maybe AOC doesn’t.) But they nonetheless rail against this particular tax, while supporting all other taxes.

I suspect that their real opposition is not to the tax, but to the taxer. The Democrat’s mantra is Orange Man Bad, and so everything he says and does is bad, even when he proposes something they usually love – a tax increase.

Now here’s an interesting connection. In Trump’s first administration eight years ago, the Republicans passed sweeping tax cuts. Tax cuts benefit the people who pay real taxes. Duh.

As pointed out above, the people who pay real taxes are largely the people who make real money. Double duh.

And so, the Trump tax cuts benefited real people who make real money and therefore pay real taxes. They didn’t much benefit people who don’t make money and therefore don’t pay taxes. Triple duh (and let’s get out the tiny violin).

Those Trump tax cuts are set to expire at the end of this year. If that happens, the result will be a tax increase amounting to about $400 billion/year.

If that number sounds familiar, it’s because it’s the same number mentioned above in connection with the tax revenue that will be realized by the new tariffs.

That’s right, the tariffs will approximately pay for extending the tax cuts. A coincidence? I think not.

There’s another twist. The people who will benefit from extending the tax cuts are not the same people who will pay the tariffs that offset the cost of them. The tariffs will be paid by everyone buying imported goods – people who buy Japanese cars, Korean electronics and South American vegetables. In short, they’ll be paid by pretty much everybody.

But extending the tax cuts will benefit people in proportion to how much they pay in taxes. The people who pay a lot of tax will get a lot of benefit. As pointed out, those are people who are wealthy.

An apt slogan might be, “To each according to what was taken from each.” Apologies to Karl Marx.

The end result is to chip away, a bit, at the progressiveness of the tax system – the system where wealthy people not only pay more because they make more, but also pay at a higher percentage.

That progressive tax system is how we got into an arrangement where the bottom 50% pay only 3% of federal income taxes while the top 1% pay 40%.

You may like this outcome, or not, depending on where you fall on the income spectrum.

But as a matter of social policy, it’s clear that our current progressive tax system leaves the bottom 50% as non-stake holders. Those non-stake holders naturally push for higher taxes because they know they themselves won’t have to pay them. They get to free load.

Democrats have pandered to those free loaders for a long time. That’s been successful for the Democrats, but destructive to the nation.